Hope in the air

Hopes are running high as we approach the presentation of Union Budget for 2017-18 on Wednesday. Real estate, in the backdrop of the ongoing transformation, is awaiting several sector-specific measures that would help bolster the sentiment and ultimately the business.

Both prospective home-buyers and property developers are waiting for some cheer through budget proposals. Be it unaffordable housing prices for homebuyers or lack of more financing avenues for realty developers, the sector is looking forward to this event in the context of government’s vision of ‘Housing For All by 2022’.

Real estate sector is currently going through a transformation that would lead to improved transparency and higher confidence among homebuyers. The revamp is expected to continue through reforms such as setting up of Real Estate Regulatory Authority and implementation of Goods & Services Tax, Benami Transactions (Prohibition) Act along with the recent demonetisation move.

While benefit of any change is corporate tax burden will be pervasive, the sector has been seeking industry status to lower its borrowing costs for long now. It is likely that the government, in its efforts to support mass housing, may accord infrastructure tag to affordable or low cost housing.

With the government’s stated vision to ensure Housing for All by 2022, affordable housing needs to be given much-expected support in terms of tax incentives for developers to build more in this category. Developers also need to put in more efforts to build such projects not only on the outskirts of cities but also at locations that are accessible from the growth centers.

Another incentive for homebuyers could be in the form of increase in deduction for principal repayment under Section 80C to Rs 2.5 lakh from current Rs 1.5 lakh and this would help revive the sluggish sales momentum.

In the upcoming budget, the sector is also expecting clarity on GST rates and benefits for the affordable housing sector to avoid any negative impact of GST implementation.

Despite commercial real estate being in a buoyant zone for at least last two years and the government making efforts to push Real Estate Investment Trusts, we have still not seen a single Real Estate Investment Trusts listing as unviable tax structure has been acting as a major challenge.

Commercial property developers are looking for reduced level of taxation on REIT income and tax exemption on the transfer of assets by sponsors to the REIT are some of the key announcements to take their listings ahead.

With the steps that government has already initiated, it’s clear that the Union Budget will take its constructive process further to empower both homebuyers and businesses.

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